The Doctrine of Maintenance of Share Capital and the Issue of Dividends

Question 1

Allotted share capital : shares are deemed to be allotted when a person acquires the unconditional right to be included in the company’s register of members - statute

Answer 1

s558

Question 2

Public companies are required to have a minimum alloted share capital of 50,000 pounds

Answer 2

s 761/ 763

Question 3

The company must maintain and not reduce its share capital except in certain very limited circumstances

Answer 3

The doctrine of capital maintenance

Question 4

The doctrine of capital maintenance (case law)

Answer 4

Trevor v Whitworth (1887)

Question 5

Doctrine of capital maintenance- statute

Answer 5

s658

Question 6

Impact of the doctrine of capital maintenance

Answer 6

1. Dividends
2. Distributions

Question 7

1. Dividends- statute

dividend = distribution

Answer 7

s 829(1)

Question 8

1. Dividend- statute

dividend should be payed out of “distributable profits”

Answer 8

s830(1), s830(2)

Question 9

1. Dividend -statue
   relevant accounts

Answer 9

s 836

Question 10

1. Dividend
   relevant accounts (3)

Answer 10

• annual accounts
• interim accounts
• initial accounts

Question 11

1. Dividend
   three types of dividends

Answer 11

1. dividend - by way of cash to shareholders
2. scrip dividend- the company gives the existing shareholders further shares
3. dividend in specie- value by way of assets

Question 12

1. Dividend-

final dividends declared by special vs ordinary resolution

Answer 12

ordinary resolution

Question 13

1. Dividend-

recommended by the directors alone, particularly profitable quarter

Answer 13

interim dividends

Question 14

2. Distribution-True or False

Any transaction in which a shareholder receives value will be a distribution, not only payment of a cash dividend

Answer 14

true

Question 15

2. Distribution- case

This case illustrates the importance of ensuring that directors’ salaries are correctly paid, particularly for directors who are also shareholders

Answer 15

Re Halt Garage

Question 16

2. Distribution- case
   Intra- group transfers

Answer 16

Aveling Barford v Perion Ltd

Question 17

2. Distributions- case

Unlawful distributions- liability of directors : directors

Answer 17

Bairstow v Queens Moat Houses plc
(2001)

Question 18

2. Distributions- case

Unlawful distributions - liability of directors: shareholders

Answer 18

It’s a Wrap (UK) Ltd v Gula (2006)

Question 19

Distributions- statute

where a distribution is made in contravention of the requirements of CA and, at the time of the distribution, the member knows or has reasonable grounds for believing the distribution to have been unlawful, they are liable to repay it to the company

Answer 19

s 847 (1) + (2)

Question 20

Dividends - steps that the board must take before issuing a dividend/ distribution

Answer 20

1. Directors’ duties (s171, s172)
2. Restrictions on distributions
3. Are there any distributable profits?
4. Amount of distribution